African Trade Ministers Split on EPA Path Forward as Deadline Looms

8 May 2014

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The October deadline for African countries to conclude their Economic Partnership Agreements (EPAs) with the EU took centre stage at a meeting of African Union (AU) trade ministers in Addis Ababa, Ethiopia, with countries remaining divided over the path forward. During last week’s meeting, officials also discussed the continent’s role in the WTO’s post-Bali process, while reviewing other bilateral and regional trade initiatives, including the hoped-for renewal of the US’ African Growth and Opportunity Act and the preparations for a future Continental Free Trade Area.

EPAs fuel scepticism

At last week’s meeting, several African trade ministers openly sided with Nigeria against the planned EU EPAs, despite recent progress made by some regional blocs towards finalising these trade pacts.

“We must not sign an agreement without first of all carrying out a robust economic analysis of the overall impact the agreement will have on the region, our children and future generations,” reiterated Nigerian trade minister Olesugun Aganga. (See Bridges Africa, 15 April 2014)

One trade expert who has been following the negotiations closely indicated that such a strong declaration could negatively influence those countries involved in the process that still remain indecisive.

Zambian commerce minister Robert Sichinga agreed with Nigeria, encouraging African countries to further deepen their intra-regional trade through value addition of their raw materials. Similar sentiments were also expressed by Niger trade minister Alma Oumarou, who urged fellow African countries to evaluate the EPAs’ impacts realistically before signing.

AU Trade Commissioner Fatima Haram Acyl agreed with the ministers, explaining that there remains little clarity on the way forward regarding the EPAs, while noting the potential challenges that these could pose for the continent’s structural transformation.

“As far as Europe continues to insist on the present model of EPA… Africa should not agree to the EPAs,” she declared. Should the negotiations continue along the same vein, she added, Africa should consider EPA alternatives – such as deepening intra-African trade ties and pushing for alternative arrangements with Brussels, such as the EU Generalised System of Preferences (GSP).

Some experts say, however, that the EU GSP is not a genuine alternative to EPAs, given that the former is a unilateral scheme – thus having limited predictability. The GSP, they note, addresses only market access issues, without other development components. The reciprocity required under EPAs, meanwhile, is likely to pose challenges for African countries.

According to the draft report of the conference, a copy of which has been seen by Bridges, the AU Commission and the UN Economic Commission for Africa (UNECA) were both mandated to analyse the impact that the 1 October withdrawal of the EU Market Access Regulation – which provides these countries with preferential access to the European market – would have on Africa.

They have been also been asked to consider alternative solutions in order to avoid trade disruptions, should that October deadline not be extended.

“Even if we were to say, ‘Oh no, what a bad idea, let’s do something,’ it would take us two years,” one EU official told the Financial Times, suggesting that the deadline might not be pushed back.

Despite these concerns, efforts are still underway to conclude regional EPAs in Africa before the deadline. West African leaders reached a compromise earlier this year on their pact with Brussels – despite reservations by some African countries, most vocally Nigeria, over the deal’s potential impact on their industrial development. (See Bridges Africa, 31 March 2014)

Some experts warn that the EPA negotiations now appear to be taking a different path, and still have no clear end in sight. The situation seems to be particularly challenging for countries such as Kenya, Ivory Coast, and Ghana which are struggling to balance the need to preserve their EU market access with the position of their respective regional blocs.

ECOWAS committee review

Last March, ECOWAS heads of state and government established an ad hoc committee – consisting of Nigeria, Ghana, Côte d’Ivoire and Senegal – to continue work on the EU-West Africa EPA, including the analysis of the remaining technical concerns raised by Nigeria on the current compromise. The committee was asked to respond within two months.

Sources confirm that Nigeria reaffirmed its EPA objections during a separate meeting held in Accra, Ghana last week. Nigeria argues that the current market access structure – market opening of 75 percent over the next 20 years, with 90 percent of products to be liberalised during the first 15 years – would significantly hamper its economy.

It has instead requested a reclassification of 181 tariff lines in other categories of the offer, which some warn could dismantle the current compromise. The results of the Accra meeting should be submitted to the trade ministers of these four countries when they meet on 10 May.

Post-Bali

In Addis, trade ministers also discussed the implications of the WTO Trade Facilitation Agreement, which was concluded at the global trade body’s Ninth Ministerial Conference in Bali, Indonesia in December 2013.

The draft conference report says that the trade facilitation pact – which was the pinnacle of the “Bali package” – should be implemented on a provisional basis, in line with paragraph 47 of the Doha Declaration. The pact, they urge, should later be reviewed for balance with the rest of the Doha Round areas once these are resolved, in line with the WTO principle of the “single undertaking.”

The comments come as the WTO Preparatory Committee on Trade Facilitation prepares to enter the second phase of its work toward implementing the pact, having finished a legal scrubbing of the English version of the text last week. The committee will now begin drafting a Protocol of Amendment in order to formally insert the trade facilitation deal into the overall WTO Agreement.

Once that process is complete, the deal will then be open for ratification by the global trade body’s members from 31 July 2014 to the same date next year. Approval from two-thirds of the membership will be required in order for the pact to enter into force. (For more on trade facilitation, see related story, this issue)

Negotiators for the African Group in Geneva have therefore been instructed by the AU trade commissioner to formally submit language on the Protocol of Amendment to the Preparatory Committee as it begins this next stage. Furthermore, ministers have mandated the AU Commission to send a new request to WTO Director-General Roberto Azevêdo to help mobilise financial resources for implementing the pact’s new requirements, once these enter into force.

A representative from Lesotho, which is the current African Group coordinator, also reportedly urged African trade ministers in Addis to provide guidance on what the group’s position should be in the post-Bali process, especially ahead of next year’s ministerial conference.

WTO members are in the process of developing a work programme aimed at resolving the remaining issues of the organisation’s Doha Round of trade talks, which have been at an impasse for years. They have been given until the end of 2014 to establish such a plan.

The AU meeting report draws lessons for the African Group on the way forward, such as the need for the continent to speak with one voice in the multilateral negotiations. To this end, the group has held quarterly retreats with the goal of harmonising its position on the post-Bali negotiations.

AGOA extension

African trade ministers also discussed the need for extending the US’ African Growth and Opportunity Act (AGOA) for the next 15 years, while continuing to consolidate regional integration in parallel. The US legislation is set to expire in September 2015, and currently provides about 6500 African products with preferential quota and duty-free access to its markets.

The conference draft report highlights better market access, flexible rules of origin, sanitary and phytosanitary (SPS) measures, and capacity building as priority areas that should be put forward for the US’ consideration.

The Obama Administration has already committed to pursuing a “seamless” AGOA renewal, while stressing that it wants to review and update the scheme in order to maintain the US’ competitive edge in Africa. As part of the review, Washington has indicated that it will drill down into the thousands of duty-free tariff lines under AGOA to determine if some sectors or countries should gradually be eased out of the programme as they become more competitive. (See Bridges Africa, 14 August 2013)

In response to an impact assessment requested by the US last year, the UN Economic Commission for Africa undertook a similar assessment of the scheme with a view to enhancing its effectiveness, and presented the results during last week’s conference.

Continental Free Trade Area

Trade ministers also highlighted the importance of improving regional integration in order to ensure the continent’s structural transformation and development. According to the report, negotiations for a planned Continental Free Trade Area (CFTA) could cover trade in goods and services, investment, intellectual property rights, and other “new” issues, provided such talks are sequenced.

Chad trade minister Aziz Mahamat Saleh noted that efforts towards establishing such a pact by 2017 have already shown some progress, in line with the road map adopted by the AU Summit of Heads of States and Government in January 2012. (See Bridges Africa, 31 March 2014). The proposed CFTA is a key component of the AU’s strategy to boost trade within the region by at least 25-30 percent in the next decade.

Intra-African trade currently represents 12 percent of Africa’s trade with the rest of the world, compared to 60 percent for Europe, 40 percent for North America, and 30 percent for the Association of Southeast Asian Nations (ASEAN), according to WTO data.

Some African countries have cited the uncertainties involved in the current multilateral and bilateral trade negotiations as an additional incentive to maintain the momentum towards establishing a CFTA. For example, the end of the EU’s quotas on African sugar exports in 2017 and falling world prices will likely force African producers to focus on maximising regional trade, a point highlighted by the Swaziland Sugar Association at a separate event last month.

Furthermore, observers note that the draft report implicitly refers to other free trade agreements currently under negotiation – such as the EU-US Transatlantic Trade and Investment Partnership (T-TIP) or the 12-country Trans-Pacific Partnership (TPP) – as further reason for Africa to step up its own integration efforts.